The Influence of Institutional Environment and Innovation Capacity on Supply Chain Performance and Competitive Advantage: Empirical Evidence from Ghana

Purpose – This study examines the extent to which institutional environment influences innovation capacity, supply chain performance, and competitive advantage among small and medium enterprises (SMEs) in Ghana, drawing insights from institutional theory.
Design/methodology/approach – The study employed a quantitative research design with survey strategy across five regions of Ghana (Ashanti, Western, Eastern, Northern, and Greater Accra). Primary data was collected from 250 SMEs using a structured questionnaire instrument. Descriptive and inferential statistical tools including hierarchical multiple linear regression were used to analyze the data.
Findings – The results reveal that normative institutional systems exert a significant positive influence on innovation capacity among SMEs. Both normative systems and supply chain innovation positively and significantly influence supply chain performance. Furthermore, firm performance and supply chain innovativeness positively influence competitiveness. However, regulatory and cognitive institutional components showed statistically non-significant effects on innovation capacity and performance.
Originality/value – This study extends institutional theory to the supply chain context in sub-Saharan Africa, providing empirical evidence on how normative institutional pressures shape innovation and performance outcomes among Ghanaian SMEs.

Ashanti, Western, Eastern, Northern, and Greater Accra

1. Abdurrasyid, H., & Praswati, A. (2023). Product innovation toward MSME's market performance on creative industry. Proceedings of the 6th International Conference of Economics, Business, and Entrepreneurship (ICEBE 2023). EAI Publishing. [Google Scholar] [Crossref]

2. Abid, N., Aftab, J., & Savastano, M. (2025). Do institutional dimensions play a role in IT firms' performance? Determining the influence of green entrepreneurial orientation and dynamic capabilities in a developing context. Business Process Management Journal, 31(2), 736-771. [Google Scholar] [Crossref]

3. Abourokbah, S. H., Mashat, R. M., & Salam, M. A. (2023). Role of absorptive capacity, digital capability, agility, and resilience in supply chain innovation performance. Sustainability, 15(4), 3636. [Google Scholar] [Crossref]

4. Aghajani, M., Memari, A., & Sankaran, S. (2026). Between conformity and change: How institutional forces shape, and are shaped by, projects. International Journal of Project Management. [Google Scholar] [Crossref]

5. Aldrich, H. E., & Wiedenmayer, G. (2019). From traits to rates: An ecological perspective on organizational foundings. In Seminal ideas for the next twenty-five years of advances (pp. 61-97). Emerald Publishing Limited. [Google Scholar] [Crossref]

6. Alshahrani, M. A., Yaqub, M. Z., & Alabdali, M. A. (2024). Examining the role of intellectual capital in maturing sustainable competitive advantage through enkindling innovations in SMEs: the moderating role of entrepreneurship-orientation. Journal of Intellectual Capital, 25(2-3), 328-359. [Google Scholar] [Crossref]

7. Alvarez, C., Urbano, D., & Lopez, T. (2024). Institutional dimensions and entrepreneurial orientation: A multilevel analysis. International Journal of Entrepreneurial Behavior & Research, 30(7), 1580-1601. [Google Scholar] [Crossref]

8. Anwar, M., & Clauß, T. (2021). Personality traits and bricolage as drivers of sustainable social responsibility in family SMEs: A COVID-19 perspective. Business Strategy and the Environment, 30(8), 3821-3835. [Google Scholar] [Crossref]

9. Anwar, M., Clauss, T., & Issah, W. B. (2021). Entrepreneurial orientation, network competence and human capital: The role of resource orchestration in SMEs' innovation performance. Journal of Business Research, 128, 63-79. [Google Scholar] [Crossref]

10. Appiah, T., & Agblewornu, V. V. (2025). The interplay of perceived benefit, perceived risk, and trust in FinTech adoption: Insights from Sub-Saharan Africa. Heliyon, 11(2). [Google Scholar] [Crossref]

11. Arsawan, W. E., Koval, V., Suhartanto, D., Babachenko, L., Kapranova, L., & Suryantini, N. P. S. (2023). Invigorating supply chain performance in small medium enterprises: Exploring knowledge sharing as moderator. Business, Management and Economics Engineering, 21(1), 1-18. [Google Scholar] [Crossref]

12. Bağcı, R. B., Raja, J. Z., & Gölgeci, I. (2026). Bridging different institutional logics: The role of institutional work in translating sustainable product-service systems across contexts. Journal of Business Ethics, 1-32. [Google Scholar] [Crossref]

13. Bağış, M., Altinay, L., & Saygılı, M. (2024). Regulative institutions, dynamic managerial capabilities, and strategic entrepreneurial performance. Journal of Small Business and Enterprise Development, 31(6), 1249-1276. [Google Scholar] [Crossref]

14. Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. [Google Scholar] [Crossref]

15. Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182. [Google Scholar] [Crossref]

16. Baumol, W. J. (1996). Entrepreneurship: Productive, unproductive, and destructive. Journal of Business Venturing, 11(1), 3-22. [Google Scholar] [Crossref]

17. Belhadi, A., Kamble, S., Jabbour, C. J. C., Gunasekaran, A., Ndubisi, N. O., & Venkatesh, M. (2021). Manufacturing and service supply chain resilience to the COVID-19 outbreak: Lessons learned from the automobile and airline industries. Technological Forecasting and Social Change, 163, 120447. [Google Scholar] [Crossref]

18. Calantone, R. J., Cavusgil, S. T., & Zhao, Y. (2002). Learning orientation, firm innovation capability, and firm performance. Industrial Marketing Management, 31(6), 515-524. [Google Scholar] [Crossref]

19. Chadee, D., & Roxas, B. (2013). Institutional environment, innovation capacity and firm performance in Russia. Critical Perspectives on International Business, 9(1/2), 19-39. [Google Scholar] [Crossref]

20. Chopra, S., & Meindl, P. (2004). Supply Chain Management: Strategy, Planning and Operation (2nd ed.). Pearson Education. [Google Scholar] [Crossref]

21. Connolly, M., & James, C. (2024). Developing and proposing rational and valid principles for effective school governance in England. Educational Management Administration & Leadership, 52(2), 417-434. [Google Scholar] [Crossref]

22. de Brito, R. P., & Brito, L. A. L. (2020). The influence of institutional changes on industry effects. Journal of Business Research, 119, 610-618. [Google Scholar] [Crossref]

23. Dela Cruz, N. A. O., Villanueva, A. C. B., Tolin, L., Disse, S., Lensink, R., & White, H. (2025). Effects of interventions to improve access to financial services for micro, small, and medium-sized enterprises in low- and middle-income countries: An evidence and gap map. Campbell Systematic Reviews, 21(3), e70061. [Google Scholar] [Crossref]

24. DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147-160. [Google Scholar] [Crossref]

25. Dogru, A. K., Gong, K., Peyrefitte, J., Scrimpshire, A., & Lai, F. (2026). The context-dependent role of innovation as a mediator between firm capabilities and performance. Innovation, 28(2), 316-344. [Google Scholar] [Crossref]

26. Donbesuur, F., Ampong, G. O. A., Owusu-Yirenkyi, D., & Chu, I. (2020). Technological innovation, organizational innovation and international performance of SMEs: The moderating role of domestic institutional environment. Technological Forecasting and Social Change, 161, 120252. [Google Scholar] [Crossref]

27. Edeh, J., Nuhu, N., Tajeddin, M., & Simba, A. (2024). Dealing with adversity: innovation among small and medium-sized enterprises in developing economies. International Journal of Entrepreneurial Behavior & Research, 30(10), 2578-2600. [Google Scholar] [Crossref]

28. Elango, B., & Dhandapani, K. (2020). Does institutional industry context matter to performance? An extension of the institution-based view. Journal of Business Research, 115, 139-148. [Google Scholar] [Crossref]

29. Ferreira, J. J., Fernandes, C. I., & Ferreira, F. A. F. (2021). To be or not to be digital, that is the question: Firm innovation and performance. Journal of Business Research, 131, 708-717. [Google Scholar] [Crossref]

30. Gao, C., Hashim, S. F., Siek, H. L., Luo, Y., Xie, C., Yan, G., & Zhang, Z. (2025). The Impact of Institutional Pressure on Supply Chain Open Innovation in SMEs: The Mediating Role of Absorptive Capacity. Journal of Information & Knowledge Management, 24(04), 2550031. [Google Scholar] [Crossref]

31. Ghana Statistical Service. (2025). Ghana integrated business establishment survey 1 report. Accra: GSS. [Google Scholar] [Crossref]

32. Ghura, H. (2024). Entrepreneurship Policy Design for Emerging Economies: Does the Stage of Development Matter?. In Technology-Driven Business Innovation: Unleashing the Digital Advantage: Volume 2 (pp. 49-59). Springer. [Google Scholar] [Crossref]

33. Glynn, M. A., & D'Aunno, T. (2023). An intellectual history of institutional theory: Looking back to move forward. Academy of Management Annals, 17(1), 1-40. [Google Scholar] [Crossref]

34. Gunday, G., Ulusoy, G., Kilic, K., & Alpkan, L. (2011). Effects of innovation types on firm performance. International Journal of Production Economics, 133(2), 662-676. [Google Scholar] [Crossref]

35. Hallward-Driemeier, M., & Pritchett, L. (2026). How business is done in the developing world: Deals versus rules. Journal of Economic Perspectives. [Google Scholar] [Crossref]

36. Hayes, A. F. (2022). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach (3rd ed.). Guilford Press. [Google Scholar] [Crossref]

37. Hernández-Espallardo, M., Rodríguez-Orejuela, A., & Sánchez-Pérez, M. (2010). Inter-organizational governance, learning and performance in supply chains. Supply Chain Management: An International Journal, 15(2), 101-114. [Google Scholar] [Crossref]

38. Heubeck, T., Held, P., & Meckl, R. (2026). Slack resources and SMEs' international performance: The moderating role of dynamic capabilities. International Business Review, 35(5), 102608. [Google Scholar] [Crossref]

39. Hoekman, B., & Taş, B. K. O. (2022). Procurement policy and SME participation in public purchasing. Small Business Economics, 58(1), 383-402. [Google Scholar] [Crossref]

40. Ires, I. (2024). Barriers to an enabling environment in start-up acceleration in fragile and conflict-affected settings in Jordan and Nigeria. International Water Management Institute. [Google Scholar] [Crossref]

41. Ismail, A. I., Abdul-Halim, H., Ahmad, N. H., & Ramayah, T. (2023). Competitive strategies and SME performance: The mediating role of innovation capability. Journal of Open Innovation: Technology, Market, and Complexity, 9(2), 100061. [Google Scholar] [Crossref]

42. Kim, W., Fang, M., Pang, Q., & Su, M. (2024). SME innovation, supply chain strategy fit and business performance: the moderating role of environmental uncertainty. Technology Analysis & Strategic Management, 36(11), 3772-3785. [Google Scholar] [Crossref]

43. Kostova, T., Beugelsdijk, S., Scott, W. R., Kunst, V. E., Chua, C. H., & van Essen, M. (2020). The construct of institutional distance through the lens of different institutional perspectives: Review, analysis, and recommendations. Journal of International Business Studies, 51(4), 467-497. [Google Scholar] [Crossref]

44. Kraus, S., Breier, M., Jones, P., & Hughes, M. (2021). Individual entrepreneurial orientation and intrapreneurship in the public sector. International Entrepreneurship and Management Journal, 17(3), 1247-1268. [Google Scholar] [Crossref]

45. Kraus, S., Ribeiro-Soriano, D., Schüssler, M., & Gast, J. (2022). The resource-based view and entrepreneurship: A bibliometric analysis. Journal of Business Research, 139, 1490-1506. [Google Scholar] [Crossref]

46. Kryeziu, L., Krasniqi, B. A., Bağış, M., Hajrullahu, V., Zhushi, G., Bytyçi, D., & Ismajli, M. (2024). The effects of institutions, firm-level factors and rational decision-making on entrepreneurial behaviors of MSMEs: lessons and opportunities for transition communities. Journal of Enterprising Communities, 18(4), 771-797. [Google Scholar] [Crossref]

47. Lee, J. M., Narula, R., & Hillemann, J. (2021). Unraveling asset recombination through the lens of firm-specific advantages: A dynamic capabilities perspective. Journal of World Business, 56(2), 101193. [Google Scholar] [Crossref]

48. Li, R., Autio, E., & Zhang, T. (2020). Institutional environments and entrepreneurial start-ups: An international study. Management Decision, 59(13), 41-59. [Google Scholar] [Crossref]

49. Manolova, T. S., Eunni, R. V., & Gyoshev, B. S. (2008). Institutional environments for entrepreneurship: Evidence from emerging economies in Eastern Europe. Entrepreneurship Theory and Practice, 32(1), 203-218. [Google Scholar] [Crossref]

50. Maurer, J. D., Creek, S. A., Bendickson, J. S., McDowell, W. C., & Mahto, R. V. (2022). The three pillars' impact on entrepreneurial activity and funding: A country-level examination. Journal of Business Research, 142, 808-818. [Google Scholar] [Crossref]

51. Mchunu, N., Maphumulo, J. R., & Nyide, C. J. (2025). Achieving competitive advantage through business innovation and digitalization by South African small and medium-sized enterprises: A systematic literature review. International Journal of Business Ecosystem & Strategy, 7(3), 222-232. [Google Scholar] [Crossref]

52. Meliou, E., & Urbano, D. (2025). Institutional dimensions and entrepreneurial orientation: A meta-analytic review. Journal of Business Venturing, 40(2), 106385. [Google Scholar] [Crossref]

53. Mensah, P. O., Yong, J. Y., Dura, C. C., & Mensah, H. K. (2025). Institutional networking capability as a catalyst for sustainable supply chains in the manufacturing sector of Ghana: The role of green human resource management strategy and green dynamic capability. Journal of Environmental Management, 387, 125865. [Google Scholar] [Crossref]

54. Mikalef, P., & Krogstie, J. (2020). Examining the interplay between big data analytics capability and competitive strategies in driving firm performance. Information & Management, 57(2), 103169. [Google Scholar] [Crossref]

55. Najafi-Tavani, Z., Sharifi, H., & Najafi-Tavani, S. (2022). The role of innovation in firm performance: A systematic review. Technovation, 110, 102378. [Google Scholar] [Crossref]

56. Nguimkeu, P. (2025). Entrepreneurship in Africa: Laying the Groundwork for Success. [Google Scholar] [Crossref]

57. Nimfa, D. T., Islam, A., Latiff, A. S. A., & Wahab, S. A. (2021). Role of innovation competitive advantage on strategic orientation dimensions and sustainable growth of SMEs in Nigeria. In International Conference on Society 5.0 (pp. 46-62). Springer. [Google Scholar] [Crossref]

58. Nwoba, A. C., Donbesuur, F., Olabode, O., Adefe, K., Adusei, C., & Adeola, O. (2025). Institutional stimulus and firm innovativeness: examining the roles of digital technologies adoption and inbound openness. R&D Management, 55(5), 1533-1545. [Google Scholar] [Crossref]

59. Odei, S. A. (2024). The relationship between perceived institutional conditions and firm-level innovations in emerging markets: Moderating effects of firm ownerships. PLOS ONE, 19(1), e0291290. [Google Scholar] [Crossref]

60. Osei, C. D., Zhuang, J., & Adu, D. (2024). Impact of regulatory, normative and cognitive institutional pressures on rural agribusiness entrepreneurial opportunities and performance: empirical evidence from Ghana. International Food and Agribusiness Management Review, 27(4), 651-670. [Google Scholar] [Crossref]

61. Otache, I. (2024). Innovation capability, strategic flexibility and SME performance: the roles of competitive advantage and competitive intensity. African Journal of Economic and Management Studies, 15(2), 248-262. [Google Scholar] [Crossref]

62. Pallant, J. F. (2011). SPSS survival manual: A step by step guide to data analysis using SPSS (4th ed.). Allen & Unwin. [Google Scholar] [Crossref]

63. Persaud, A., & Zare, J. (2023). Institutional varieties, governance quality, and firm-level innovation in emerging economies: Case of India. Growth and Change, 54(1), 234-259. [Google Scholar] [Crossref]

64. Plata, G., Scott, S., & Aparicio, S. (2026). Fostering an environment for social entrepreneurship: a comparative analysis across economic development levels. Review of Managerial Science, 20(1), 135-168. [Google Scholar] [Crossref]

65. Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. Free Press. [Google Scholar] [Crossref]

66. Raimi, L., Bamiro, N. B., & Haini, H. (2024). Do institutional pillars support or harm entrepreneurship and economic growth? A systematic review. Journal of Entrepreneurship and Public Policy, 13(2), 278-305. [Google Scholar] [Crossref]

67. Ramawat, I., & Nayak, N. C. (2026). Role of institutions, investor sentiment and uncertainty avoidance in entrepreneurship development: an empirical study in developed and emerging economies. Journal of Financial Economic Policy. [Google Scholar] [Crossref]

68. Riaz, A., & Ali, F. H. (2025). Institutional pressure and responsible innovation: how big data analytics adoption drives manufacturing SMEs toward competitiveness. Journal of Global Responsibility, 16(2), 245-264. [Google Scholar] [Crossref]

69. Ryu, I., So, S., & Koo, C. (2009). The role of partnership in supply chain performance. Industrial Management & Data Systems, 109(4), 496-514. [Google Scholar] [Crossref]

70. Sang, B., Noor, R. M., Ghazali, E. M., & Aghamohammadi, N. (2024). How does supply chain collaboration improve innovation performance of SMEs? The roles of absorptive capacity and business environment. Journal of Innovation & Knowledge, 9(4), 100607. [Google Scholar] [Crossref]

71. Scott, W. R. (1995). Institutions and organizations. Sage Publications. [Google Scholar] [Crossref]

72. Scott, W. R. (2013). Institutions and organizations: Ideas, interests, and identities. Sage Publications. [Google Scholar] [Crossref]

73. Selviaridis, K., & Spring, M. (2022). Fostering SME supplier-enabled innovation in the supply chain: the role of innovation policy. Journal of Supply Chain Management, 58(1), 92-123. [Google Scholar] [Crossref]

74. Shahzad, F., Du, J., Khan, I., & Wang, J. (2022). Decoupling institutional pressure on green supply chain management efforts to boost organizational performance: moderating impact of big data analytics capabilities. Frontiers in Environmental Science, 10, 911392. [Google Scholar] [Crossref]

75. Sulemana, M. A., Tutu-Boahene, B., Owusu, S. O., & Akrofi, B. (2026). The role of absorptive capacity in strengthening entrepreneurial innovation and agribusiness competitiveness among food processing SMEs in Ghana. Discover Agriculture, 4(1), 7. [Google Scholar] [Crossref]

76. Thompson, V. A. (1965). Bureaucracy and innovation. Administrative Science Quarterly, 10(1), 1-20. [Google Scholar] [Crossref]

77. Tobing, A. E. N., & Santosa, W. (2025). The Effect of Absorptive Capacity on Supply Chain Innovation Performance through Supply Chain Resilience in Manufacturing Companies: Empirical Study From Bogor Region, Indonesia. Golden Ratio of Data in Summary, 5(1), 119-131. [Google Scholar] [Crossref]

78. Tsakalerou, M., Abil, A., Ribiere, V., Lukhmanov, Y., & Tynybayeva, N. (2025). The innovation capability equation: A systematic review of global determinants of SME's success. Journal of Innovation & Knowledge, 10(4), 100757. [Google Scholar] [Crossref]

79. Tsiligkiris, V. (2026). Reframing Transnational Education Through Institutional Logics: The THRIVE Framework for Sustainable and Equitable Partnerships. Higher Education Quarterly, 80(1), e70091. [Google Scholar] [Crossref]

80. Tukamuhabwa, B. R., Mutebi, H., & Ojok, B. A. (2024). Supply chain performance in the wooden furniture industry: The effect of institutional pressures and supply chain integration in a developing country context. Journal of African Business, 25(2), 349-370. [Google Scholar] [Crossref]

81. Urbano, D., Alvarez, C., & Lopez, T. (2026). Towards a comprehensive framework of the institutional dimensions in entrepreneurship research. Small Business Economics, 66(3), 1059-1116. [Google Scholar] [Crossref]

82. Webb, J. W., Khoury, T. A., & Hitt, M. A. (2020). The influence of formal and informal institutional voids on entrepreneurship. Entrepreneurship Theory and Practice, 44(3), 504-526. [Google Scholar] [Crossref]

83. Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171-180. [Google Scholar] [Crossref]

84. World Bank. (2026). Eswatini Economic Update: Unlocking private sector growth. World Bank Group. [Google Scholar] [Crossref]

85. Yaibuathet, K., Enkawa, T., & Suzuki, S. (2008). Influence of institutional environment towards the development of supply chain management. International Journal of Production Economics, 115, 262-271. [Google Scholar] [Crossref]

86. Yu, X., Cao, G., & Wang, X. (2025). Entrepreneurial bricolage and disruptive innovation: the joint effect of learning from failure and institutional voids. R&D Management, 55(4), 1059-1077. [Google Scholar] [Crossref]

87. YuSheng, K., & Ibrahim, M. (2020). Innovation capabilities, innovation types, and firm performance: evidence from the banking sector of Ghana. Sage Open, 10(2), 2158244020920892. [Google Scholar] [Crossref]

88. Zailani, S., Rahman, M. K., Nizamani, A. H., Aziz, A. A., Bhuiyan, M. A., & Gazi, M. A. I. (2024). Sustainable supply chain performance lesson from Malaysian manufacturing firms. Foresight, 26(2), 205-224. [Google Scholar] [Crossref]

89. Zarea, H., Hosseini, E., Moradi, M., & Bossaghzadeh, N. (2026). The mediating roles of absorptive capacity and ambidexterity in the dynamic capabilities framework. International Journal of Global Business and Competitiveness, 1-9. [Google Scholar] [Crossref]

90. Zhuang, J., & Sun, Y. (2024). Institutional pressures and entrepreneurial orientation: A study of Ghanaian SMEs. Journal of Entrepreneurship in Emerging Economies, 16(3), 451-470. [Google Scholar] [Crossref]

• The Effectiveness of Logistics Management - A Case Study of: Future Supply Chain Solutions Ltd (FSC)
• The Effect of E-Informing on Procurement Performance of Public Universities in Kenya: The Case of Egerton University
• Barriers to Circular Supply Chain Implementation in Indian Textile SMEs: An Exploratory Qualitative Study
• Sustainable Supply Chain to Enhance the Environmental Performance in the Cleaning Detergents Manufacturing Industry: Case of Harare, Zimbabwe
• Exploring Innovative Frontiers: Digital Public Infrastructure and Multimodal Connectivity as Catalysts for MSME Supply Chain Transformation in India